Organizational Assessment Guideline

IRF

Think Tank Development Initiative (TTDI)

Date: 12 March 2014

By:

Contents

Introduction and Outline ............................................................................................................ 3

PART A: Methodology .............................................................................................................. 4

1. Why organizational assessment? ........................................................................................ 4

2. Methodology .......................................................................................................................... 5

PART B: Governance and Operations ....................................................................................... 7

3. Governance and Organizational Structure ............................................................................. 7

4. Strategic Planning ................................................................................................................ 14

5. Annual Planning and Operations .......................................................................................... 16

6. Risk Management ................................................................................................................. 18

7. Human Resources (HR) ....................................................................................................... 19

8. Communications ................................................................................................................... 20

PART C: Financial Systems ..................................................................................................... 22

9. Budgeting ............................................................................................................................. 22

10. Financial Reporting ............................................................................................................ 24

11. Audit ................................................................................................................................... 27

12. Accounting ......................................................................................................................... 29

13. Authorizations and payments ............................................................................................. 31

14. Procurement ....................................................................................................................... 34

15. Anti-Corruption .................................................................................................................. 35

Introduction and Outline

This Guideline aim at supporting the IRF staff members when conducting organizational

assessments of potential partner think tanks under the joint IRF- Sida Think Tank

Development Initiative (TTDI).

The Guideline has a practical focus and is intended to provide insights in the core thematic

fields of an organizational assessment. It will further provide practical tips for methodology

and links to useful readings. It also summarizes the TTDI criteria for its partner organizations.

The Guideline includes three sections:

Part A focuses on methodology and tips for conducting an organizational assessment.

Part B focuses on governance and organization.

Part C focuses on financial systems.

PART A: Methodology

1. Why organizational assessment?

The organizational assessment of potential TTDI partner organizations has two main aims:

to assess the CSO (Civil Society Organization)’s readiness to receive core support

from the TTDI, and

to raise the organizational capacity and maturity of the CSO.

Those CSOs with experience of working with international donors often have well developed

project management system and systems for financial reporting to their donors. However,

their internal control systems can be rudimentary and only allow the organizations to comply

with the minimum requirements of the law of Ukraine.

At the same time, the systems relevant for managing project funding are often not enough for

a CSO to be ready to receive core support. While project funding is provided against a

detailed budget where the CSO often reports back by providing receipts for each payment

done under each budget line, core funding relies on the existing systems of the CSO. Core

funding means funding the organization itself, and not its specific project activities. Instead,

the funding should help the CSO to achieve its strategic goals.

The second aim of the organizational assessment is to identify weak areas where the CSOs

need to improve their organizations further. Thus, an organizational assessment has the

ambition to help CSOs to become even more democratic, legitimate and sustainable.

The main questions to answer in an organizational assessment are:

- Does the organization fulfill the established criteria for a TTDI partner

organization?

- Does the organization fulfill the legal requirements of the law they are governed by?

- Does the organization have a sufficient set of rules and regulations in line

with best practice?

- Does the organization implement its own charter and other established

procedures?

2. Methodology

This chapter aims at giving some practical advice and tips on how to conduct an

organizational assessment.

Documentation and implementation:

The organizational assessment focuses on the systems established within the organization.

The systems could be:

Documented but not implemented (e.g. a written policy that is not used)

Implemented but not documented (e.g. a procedure used that does not exist in writing)

Documented and implemented (e.g. a written procedure that is used by all staff

members)

Ultimately, a good system would include procedures that are both documented and

implemented. The assessment should preferably look at both aspects.

Gathering data: Triangulation of data:

In simple words, the triangulation of data means using data and input from two or more

sources to make a general conclusion. A short article about triangulation and how it can be

useful for assessments can be found here:

http://www.write.com/writing-resources-articles/research-writing/research-process/data-

triangulation-how-the-triangulation-of-data-strengthens-your-research

For the TTDI organizational assessments, it is important to base recommendations on at least

two sources of data: combining information from interviews with collection of written

documentation as evidence/validation.

Example: You wish to assess the procurement system of a CSO. To triangulate data, you can

read the procurement policy (if existing), analyze a random selection of protocols or

documents from performed procurements, and interview relevant staff members to let them

describe the system and how it is used.

Gathering Data: Conducting spot-checks

The organizational assessment does not include a complete review of all operational measures

taken in the organization. However, conducting spot-checks is important as an evidence tool

of how well the CSO implements its procedures. As a rule of thumb, even if you chose

random examples, always select the examples for spot-checks yourself (do not let the

organization pick them for you). This to ensure maximum objectivity.

Providing Recommendations:

To give support to the CSO’s further development, the TTDI assessments should also include

recommendations to the CSO for its organizational development. Recommendations could be:

“must have”, i.e. what the CSO needs to do to fulfill the requirements to receive core

support from TTDI, or

“should have”, i.e. what the CSO needs to improve to become a more efficient, stable

and transparent organization

To be useful for the organization, the recommendations need to be practical, concrete and

realistic. Remember that it should be possible for the TTDI team to come back and measure if

the CSO has implemented the recommendation or not.

Example:

Vague recommendation: “The CSO should improve its governance structure”

Concrete recommendation: “The CSO should establish an independent Supervisory Board”

The practical steps to conduct an organizational assessment for TTDI

The organizational assessment of a potential partner for the TTDI is done in four steps:

1. Limited call for potential qualified participants of TTDI and request documentation

2. Initial analysis of documentation

3. Visits and interviews with the CSO governing bodies, management and staff members.

4. Analysis and conclusions

Further readings

ICAC Corruption Prevention Department Hong Kong: Best Practice Checklist for

Governance and Internal Control in NGOs

http://www.icac.org.hk/filemanager/en/content_1031/ngo_e.pdf

PART B: Governance and Operations

This section of the Guideline gives thematic insights in good governance principles and CSO

operations. Each chapter includes:

a thematic introduction and practical examples,

a table of useful documentation to request from the CSO,

links to further reading, and

an overview of the established TTDI criteria for partner CSOs.

3. Governance and Organizational Structure

Introduction to Good Governance

The governance of an organization does not equal the management of an organization.

While management is about managing the daily operations, governance includes:

• Oversight of the organisation

• Responsibility for achieving aims and objectives

• Decision-making processes

• Accountability

• Delegated authority

In some CSOs, governance and management are not clearly separated in different functions.

This is not in line with principles of good governance, which includes:

• Clearly defined decision-making powers: the charter should define the decision-

making authority of the different governing bodies.

• Separation between oversight/governance and management: no person has both

management and governance function. This principle is often referred to as

segregation of duties.

• Defined roles for members, Board and staff: the documentation of the CSO

should give clear roles for the different functions, their mandate and their

authority

• Transparency: the CSO should function in a transparent manner towards its

members, its staff and the general public

• Accountability: the governance model should ensure that there is accountability

from lower governing bodies to higher, and from the General Assembly to the

target group.

Examples of how a CSO can have a mixed governance and management function:

- The Executive Director is also the chairman of the Board

- There is no external Board = staff are also board members

- The Board is involved in daily management tasks

Examples of potential influence of a lower governing body on a higher governing body:

- The Executive Director approves the agenda for the General Assembly

- New members are approved by the Board (according to best practice, the General Assembly

should approve new members)

- The Executive Director has voting rights in the Board and/or the General Assembly

While implementing a good governance model with clear segregation of duties can be a

cumbersome process, there are clear gains for the organization to establish good governance

structures:

• It safeguards the public interest: A CSO works with money from others, often

tax payer’s money from donor organizations. As a result, there is a public

interest that the CSO uses the funds in a good way. By having a transparent

system, the CSO can ensure a better protection of these funds.

• It demonstrates integrity and encourages trust and confidence.

• It provides for organizational stability through establishing governing bodies

instead of “one-man-shows.”

• It ensures objective decision-making where the CSO gets external input from

outside the management team.

• It increases likelihood of fulfilling aims and objectives by having bodies that

take strategic views on the daily operations.

• It prevents corruption as it establishes higher levels of internal controls.

In practice, the segregation of duties between governance and management often means that

the CSO has a General Assembly as its highest governing body, an independent Board and an

Executive Director appointed by the Board:

Remember that each organization has its own personal features and needs. There is no given

model that fits all. What is important is to ensure that the main principles of good governance

are kept to.

Membership

The good governance models discussed above assume that the CSO has members who

represent the target group for the CSO activities: a media CSO might have media companies

as members, a CSO working for a vulnerable group might have representatives from this

group among its members etc. having members of the target group as members means that the

CSO has legitimacy i.e. the credibility to talk on behalf of its target group.

In Ukraine, it is quite common that the CSO GA members consist of employees or consultants

working in the CSO. This creates a significant problem in terms of segregation of duties. At a

minimum, it should be ensured that those receiving salary from the CSO are not a majority of

the CSO members.

Not all CSOs have members. Some CSOs do not aim to speak on behalf of a specific group of

people. Think tanks could be found in this category. If a CSO does not have members, it

needs to find its credibility and roots in the Ukrainian civil society in another way, for

example through its Board members.

Decision-Making

The Board of a CSO should, in line with good governance, be external and independent. This

means that it should consist of persons that are not part of the management or staff team of the

organization, i.e. those that are financially remunerated by the CSO. To be able to provide

guidance to the CSO, a mix of different backgrounds and expertise can be fruitful. The

Executive Director should be hired by the Board and report to the Board.

The decision-making within the organization should be well documented and clear. In

general, the decision-power should have its starting point with the General Assembly and

thereafter be delegated to the Board and to the Executive Director. This delegation of power

should be established in the charter. Further delegation of decision authority from the

Executive Director to other managers or staff members should be documented and kept to.

Example: According to the charter of CSO X, the Executive Director has the right to sign

agreements on behalf of the CSO. During his leave, he delegates this right to his Deputy

Director. This is documented in a Power of Attorney.

Example: The table below shows an example of a governance model and a scheme of

delegation. The first table sets out the roles and responsibilities of each body.

Roles and Responsibilities

Subject General Assembly Board Executive

Director/Management

team

CSO governance

Approval of statute

and subsequent

amendments

Election/appointment

of Board members

Approval of

governance framework

including scheme of

delegation, Board

terms of reference

Abides by its role

as set out in the

statute

Strategy Receives strategic plan Sets and provides

management team

with overall

strategic direction

Receives direction from

Board

Preparation of strategic

plan for approval by

Subject General Assembly Board Executive

Director/Management

team

Consideration and

approval of

strategic plan

Board

Annual plans and

budgets

Consideration and

approval of annual

plans and budgets

Approval of

changes to

plan/budget

having a

significant impact

on strategy or

financial position

Preparation of annual

plans and budgets in line

with the strategic plan for

approval by Board

Identify and submit

proposals to Board where

changes in work plans or

budgets have a

significant impact.

Financial

monitoring

Receive regular

financial reports

indicating actual

financial

performance to

budget and cash

flow forecasts

Closely monitor overall

financial position

(including cash flow)

and performance against

budget.

Provide regular financial

reports to Board

Modes of operation: this table sets out some of the practical ways that each body operates

Subject General Assembly Board Executive

Director/Management

team

How members

appointed?

Approved by GA Board Members

elected/appointed by

GA members

Open recruitment

processes. Appointment

of Executive Director

made by Chair of Board

Frequency of

meetings

Annual (but

additional meetings

can be requested by

percentage of

members)

At least quarterly Meet as management

team at least once a

month

Chaired by?

Usually Chair of

Board

Chair elected by

Board members

n/a

Remuneration of

members

No remuneration

paid to members

Board members paid

only in exceptional

circumstances (eg if

appointed to carry out

a specific, time-bound

project for the Board)

Staff paid salaries

approved by the Board

Useful documentation to request from the CSO

Document Purpose

Copy of registration Confirm that the organization is properly

registered with the Ukrainian authorities

Charter Review governance model

Review decision-making model

Meeting minutes from recent General

Assembly and Board meetings

Review if the governing bodies work

according to the governance model

Organizational chart Review organizational model

Job description for the Executive Director Review if it matches the charter and does

not give the Executive Director a governing

role

Links and further readings

The Central and Eastern Europe Working Group on Non Profit Governance: A Handbook on

NGO Governance:

http://www.dochas.ie/pages/resources/documents/Governance_Handbook.pdf

The Corporate Governance Association of Ireland: Code of Corporate Governance:

http://www.dochas.ie/Shared/Files/4/CGAI_Governance_Code__FINAL.pdf

Andrea Moncada: Think Tank Boards: Composition and Practices:

http://onthinktanks.org/2013/03/25/think-tank-boards-composition-and-practices/

John Carver and Miriam Carver: Carver's Policy Governance® Model in Nonprofit

Organizations:

http://www.carvergovernance.com/pg-np.htm

TTDI criteria

Criteria “Must” for mini

grant

“Must” for

organizational

grant

“Should” for

further

development

Be mission-driven Have a written

mission/purpose

Have a written

mission/purpose in

the strategic plan

Have a written

mission/purpose

that matches the

strategic plan and is

well-rooted in the

organization

Have an independent

board

Be prepared and

willing to establish

an independent

Board during the

mini-grant period

Have an established

independent Board

Have a well-

functioning Board

that implements its

role as supervisory

body and reports to

the highest

governing body.

Conflict of Interest Have knowledge

and understanding

of Conflict of

Interest issues

Have a documented

Conflict of Interest

policy

n/a

Legal Status The CSO is

properly registered

with Ukrainian

Authorities

n/a n/a

Registered as Think

Tank

The CSO’s charter

allows for public

policy work

n/a n/a

Clear decision-making

processes in the

organization

n/a The CSO has a

documented

delegation of

authority in line

with the charter

The CSO has a

documented

delegation of

authority that is

relevant for its size

and type of

operations

Established formal

structure

Have a staff and an

office

n/a n/a

4. Strategic Planning

The charter of the CSO should include a purpose or objective for the organization. Often, the

CSO establishes an additional mission and a vision statement.

A mission statement should explain the core reason why the organization exists and the

target group. It should give an indication to what the organization should do and what makes

the organization special or unique, and spread the organizational values and ideas of the

organization among stakeholders and staff. The vision statement should be a future-looking

statement that sets the targets the organization wants to reach, either in a decided time frame

or in a long-term future without a time frame.

The mission and vision statements are the starting points for the strategic planning of the

CSO. An outline for a strategic plan could be as follows:

Structure for a Strategic Plan

VISION

• beliefs – expectations – long term wishes

MISSION

• internal and external communication

BUSINESS CONCEPT

• my wishes/company’s competence

• simple – understandable-controlling-delimiting

GOALS (should be SMART – Specific, Measureable, Achieveable, Realistic and Timely)

• financial goals

• financing – financial balance donatinos, contracts

• market shares – new customers – positioning

• organization – recruitment – succession plan

• personnel – personnel development

STRATEGY

(how we achieve our goals)

RISK EVALUATION

(Competitors, threats in the market, opportunities)

(Our weaknesses and how to overcome them, what to focus on)

ACTIVITIES AND PLANS

(which should lead to strategic goals)

• financial plans, budget, etc.

• market plan – market activities

• product development

• plan for personnel and organization

• plan for Board of Directors and top management

•Possible changes in long-term financing

Possible changes in owner/Board of Directors

COMPANY BOTTLENECKS

• which are the most important activities which lead to measureable results

Swedish Development Advisers

It is recommendable to have a strategic budget attached to the strategic plan, indicating the

financial and human resources needed to implement the plan. It would also be important to

ensure that staff members, members of the Supervisory Board and other stakeholders are

actively involved in the development of a strategic plan to ensure a direct ownership.

Based on the strategic plan, the strategic planning needs to be linked to the operational

planning of the CSO as follows:

The strategic plan should be broken down into annual plans and thereafter into project plans.

This way, the organization creates a chain of results where the individual projects support the

overall implementation of the strategic plan.

The RBM Guideline from SDA provides more detailed input on how to establish a result-

focused, measurable strategic plan and a result assessment framework (RAF).

Useful documentation to request from the CSO

Document Purpose

Mission and vision statement Review if the mission and vision statements

are updated and well established in the

organization

Review if the mission and vision statements

align with the Strategic Plan

Strategic Plan Review if the Strategic Plan covers the

planned organizational support period

Review if the Strategic Plan has measurable

indicators and identified outcomes

Annual Plan Review if the Annual Plan is linked to the

Strategic Plan and focuses on results

Links and further readings

Denise McNerney (iBossWell, Inc.), Dominic Perri (Essential Conversations Group) and

Margaret Reid (University of Arkansas): Strategic Planning Practices Result in Higher

Performing Nonprofits

http://www.strategyplus.org/Non-Profits.shtml

Rick James, INTRAC: How to do Strategic Planning: A Guide for small and diaspora NGOs

http://www.intrac.org/data/files/resources/729/Strategic-Planning-A-PLP-Toolkit-

INTRAC.pdf

TTDI criteria

Criteria “Must” for mini

grant

“Must” for

organizational

grant

“Should” for

further

development

Strategic Plan

n/a The CSO has a

result-focused

updated strategic

plan and a RAF

valid for at least the

time period of the

organizational

grant.

The CSO has a

system to ensure

that it measures

results rather than

activities, including

an monitoring &

evaluation plan for

its RAF

5. Annual Planning and Operations

To move from the strategic level to the operational project level, an annual plan is needed.

The annual plan should be an operational road map for the year to ensure that the CSO is

moving forward in its implementation of the strategic plan, and be linked to an annual budget.

An annual plan should not be confused with an annual activity plan, listing the planned

events/products to be done during the year. Instead, the annual plan should focus on the

results that the CSO intends to have during the year.

Linked to its strategy, the CSO needs to have a system to ensure that it can properly plan,

report and follow-up on its results. Thus, it needs a monitoring & evaluation plan that

established how it intends to measure its results on project level and on consolidated level,

including identification of those responsible for the task.

Useful documentation to request from the CSO

Document Purpose

Annual plan Alignment with strategic plan

Monitoring and evaluation plan Alignment with strategic plan

TTDI criteria

Criteria “Must” for

mini grant

“Must” for

organizational

grant

“Should” for

further

development

Annual Planning and

Reporting

n/a The CSO plans its

operations on an

annual basis

The CSO has an

annual report

The CSO has an

annual plan that

establishes annual

expected results in

line with its

Strategy.

The CSO publishes

its annual report

online

Project Management n/a n/a The CSO has some

project management

templates and

planning tools at

hand

The CSO has a joint

server for all its

materials

Policy work and Networks The CSO has

policy work as

its main

activity

The CSO TT

has analytical

staff members.

The CSO has an

implemented

quality control

procedure

n/a

The Think Tank Index Have a think

tank index of

at least xxx

points

Have a think tank

index of at least xxx

points

Have a think tank

index of at least xxx

points

6. Risk Management

While the future is difficult to predict, the CSO can actively identify, analyze and address

main risks for the CSO and the implementation of its strategic plan. Therefore, the CSO needs

a structured manner of conducting risk management at the strategic, operational and project

level. These would need to be documented and systemic on an organizational level.

The first steps on the way to start up more strategic risk management work would be to

prepare a SWOT1 analysis and a risk strategy, including:

Identification of risks

Estimation of the consequences of each risk.

Estimation of the likelihood that each risk will occur.

A strategy for how risks will be mitigated, weighting costs vs. benefits.

A system for documenting and tracking risks happening and the actions taken.

N.B It is the risks to not achieving the Strategic Plan’s results, the results of the Annual Plan

or the risk of project failing that should be the focus of the risk assessment.

The decision on how to mitigate the strategic risks is the task of the Board and should be

followed-up by management. The top management needs to assess operational and financial

risks regularly and what activities to budget for and carry out. Project risks should be

considered in each project design but this analysis can be made more explicit and documented

in the progress reports to donors.

Useful documentation to request from the CSO

Document Purpose

SWOT analysis Review its alignment with the strategic plan

Risk management policy Review its alignment with the strategic plan

Board meeting minutes Review if risk assessment is part of the

discussions

Links and further readings

Better Evaluation: SWOT analysis:

http://betterevaluation.org/evaluation-options/swotanalysis

PM4NGOs: Project Management for NGOs, Discipline 4: Risk Management

http://www.pm4ngos.org/index.php/discipline-4-risk-management

TTDI criteria

Criteria “Must” for

mini grant

“Must” for

organizational

“Should” for

further

1 Strengths, Weaknesses, Opportunities and Threats

grant development

Risk Management

procedures

n/a Have a risk analysis

and plan for risk

mitigation in its

strategic plan

An implemented

risk management

procedure

7. Human Resources (HR)

“-What if I invest in the development of my staff and they leave?

-What if you don’t and they do?”

For a think tank, its employees and consultants are the main asset; it is the team and its

competence that allows the think tank to produce high level results. Keeping its good staff

members and having systems for staff development is therefore important for the

sustainability of the think tank (and ultimately for a successful implementation of its strategic

plan).

It is not unusual that HR is seen as a support function, focusing on producing contracts and

ensuring the legal aspects of the employment are fulfilled. However, the CSO should

preferably establish systems for a good human resource management, documented in an HR

policy and/or HR procedure. The HR system should at a minimum include rules and

procedures for:

Performance management, including regular staff assessments and development

measures for staff

Procedures for hiring and firing staff

Rules and procedures for vacation and leaves of absence

Rules for compensation

General rules for the office

Useful documentation to request from the CSO

Document Purpose

HR policy or HR procedure Review its quality and content

Links and further readings

HR Council.ca HR Toolkit: Developing HR Policies

http://hrcouncil.ca/hr-toolkit/policies-guideline.cfm

TTDI criteria

Criteria “Must” for

mini grant

“Must” for

organizational

grant

“Should” for

further

development

HR procedures The CSO hires

its staff and

consultants

with written

contracts

n/a The CSO has an HR

policy and

procedure

Have gender and

nondiscrimination policy

n/a Awareness of the

gains of having a

gender and non-

discrimination

policy

Have gender and

nondiscrimination

policy

Job descriptions n/a TheCSO has job

descriptions for its

top managers.

The CSO has job

descriptions for all

its staff members.

8. Communications

Having a strategy for the communication work is very important for a successful

implementation of the strategic plan. Without external exposure and public usage of the think

tank’s ideas, the efforts of the work is to a large extent in vain. The CSO should have a

communication policy (that covers both external and internal communication). While the

outline of a communication policy can differ from one organization to the other, the

communication policy could include:

General principle of communication

Target groups of the organization and key messages to convey

Communication channels

General principles for using e-mails and other channels of communication

Communication responsibilities and monitoring of communication activities

How to handle media requests

Principles for speaking on behalf of the organization

Preferably, the CSO should also have a communication strategy for the same time period as

the strategic plan where it in detail plans for the concrete communication goals and plans for

the period.

Useful documentation to request from the CSO

Document Purpose

Communication Policy Review of content and suitability for the

organization

Communication Strategy Review of content and suitability for the

organization

Review of linkages to the Strategic Plan

Links and further readings

The Overseas Development Institute (ODI): How to write a communication strategy

http://www.odi.org.uk/publications/5186-communications-strategy-planning

TTDI criteria

Criteria “Must” for

mini grant

“Must” for

organizational

grant

“Should” for

further

development

Communication strategy n/a n/a Have a

communication

strategy which

include internal and

external

communication and

is aligned with the

strategic plan. .

PART C: Financial Systems

Having a solid and transparent financial system that ensures good internal control in the CSO

minimizes the risks of funds being misused. There is, however, a clear difference between

assessing the financial systems and conducting a financial audit. Assessing the financial

systems includes an analysis of whether or not there are documented procedures and systems

to ensure directive, preventative and detective financial controls. The systems need to ensure

that these types of control exist in order to ensure that core support-type of funds are managed

appropriately.

Links and further Readings:

Secure the Future: NGO Financial Management Pocket Guide:

http://www.securethefuture.com/our_experience/archive/financemng.pdf

TTDI criteria

Criteria “Must” for

mini grant

“Must” for

organizational

grant

“Should” for

further

development

A documented financial

system

The CSO has

basic

procedures for

its financial

management

The CSO has a

financial manual or

similar

documentation of

its financial systems

n/a

9. Budgeting

For the implementation of the strategic plan, the CSO needs to develop a consolidated

annual budget for the organization (not project by project). Since core funding ultimately is

about funding the organizational development and the implementation of the strategic plan,

the CSO also needs to have a consolidated annual budget that gives an overview of all its

foreseen income and expenses.

A Strategic Budget, covering the whole strategic period should establish, on a general level,

the budget needed to reach the strategic objectives. Thereafter, a more detailed Annual Budget

should be developed in line with the annual plan.

¨

The consolidated annual budget should:

in a transparent manner include all foreseen income and expenses of the organization

during the year,

divide the income and expenses according to source of funding,

preferably include activities that are yet to be financed,

use a structure that allows it to be compared with the annual financial report.

Thus, it should be a document reflecting the strategic plan rather than a document reflecting

the existing income sources. It should be approved by the Supervisory Board and be regularly

monitored by both Supervisory Board and the Director. The budget development process and

the budget monitoring procedures needs to be documented.

Useful documentation to request from the CSO

Document Purpose

Annual budget Review its transparency and clarity,

inclusion of all sources of income and

expenditure

Review its linkage to the annual plan and

the Strategic Plan

Strategic budget Review its linkage to the strategic plan

Documentation of budget procedures Review its compliance with the statute

Ensure that the procedure ensures approval

of the budget on Board level and regular

budget monitoring

Project budgets, administrative budgets

(If no consolidated annual budget exists)

Review their outline and content

Fundraising plan Review linkage to identified funding

shortages in strategic and annual plan

Links and further readings:

Funds for NGOs: Some Tips on Financial Planning and Budget Management for NGOs

http://www.fundsforngos.org/featured-articles/tips-financial-planning-budget-management-

ngos/

TTDI criteria

Criteria “Must” for

mini grant

“Must” for

organizational

grant

“Should” for

further

development

Annual consolidated

budget

The CSO has

project

budgets for all

its projects

The CSO has an

annual consolidated

budget that aligns

with the strategic

plan.

The CSO has a

budget policy and

performs regular

budget monitoring

on board and

management level.

Fundraising n/a n/a The TT has a

fundraising plan and

a staff member

responsible for the

fundraising

10. Financial Reporting

The annual financial report of the CSO should give a transparent overview of all sources of

income and expenses. It should be done on a regular basis and be compared to the annual

budget. The process to develop a financial report should be documented and the reports

should have been approved by the correct governing body. It should be possible to easily see

what income sources the organization has had and how the funds from each income source

have been used.

To pass a financial audit, the organization needs to produce annual financial reports, i.e. a

balance sheet and a profit & loss statement for the organization. Preferably, the CSO has a

financial system that allows for automatic development of financial reports. However, among

Ukrainian CSOs, many do not have an accounting software of this sophistication. Instead,

they develop their reports manually in Excel.

When assessing the financial reports, ask yourself:

• WHAT reports exists today?

• WHO developed the report?

• HOW was the report developed? (Where did the data come from?)

• WHO uses the report and how?

Besides own financial reports for use in the organization, the CSO also needs to regularly

report to the Ukrainian authorities. The tax report should be done on a quarterly basis and

is in a cumulative way reporting on income and expenses. Thus, the report for the fourth

quarter equals the annual income and expenses.

A CSO only needs to report on the total income and the total expenses. A typical tax report

from a CSO thus looks as follows:

It should be noted that the tax reports are cash-based i.e. “cash-in” and “cash-out” (please see

chapter on Accounting for a more detailed overview of methods for accounting). If a CSO

performs cash-based accounting, its end of the year records should equal the tax report. If

the CSO performs accruals-based accounting, the end of the year records is likely to have

some mismatch with the end of the year tax reports. In this case, the financial staff members

of the CSO should be able to provide you with a clear overview of the different numbers and

their origin.

Useful documentation to request from the CSO

Document Purpose

Annual financial report (if existing) Assessment of clarity and transparency

Review how well it correlates to the annual

plan (if existing)

Documented procedure for production of

financial reports

Review appropriateness of procedure and if

it involves people with the right level of

knowledge of what is needed in the

organization

Links and further readings

Mango: Financial Management Essentials- Handbook for NGOs

http://www.mango.org.uk/Guide/CourseHandbook

TTDI criteria

Criteria “Must” for

mini grant

“Must” for

organizational

grant

“Should” for

further

development

Have clear transparent and

reliable financial reports

The TT

provide proper

and timely

financial

reporting to

the Ukrainian

authorities

The TT produces

balance sheets and

profit and loss

statements, which

are approved by the

Board.

n/a

11. Audit

External Audit

As the organizational assessment does not include a full financial audit, it is of vital

importance that the CSO has undergone a financial audit for its total operations before core

support is provided. The audit of the CSO’s financial statements means that its financial

statements have been checked by a qualified auditor, external to the CSO. The underlying

accounting records have been checked and the auditor has issued an opinion on whether or not

the financial statements reflect the actual financial situation in the CSO.

For TTDI partners, Sida requires that the CSO’s financial statements are auditedOften, the

CSOs lack funds to finance such audit and would need financial support to implement this

requirement, for example through the TTDI mini grant.

The Sida requirements for core support organizations include:

core activities shall be audited annually,

audits shall be carried out by an external, independent and qualified auditor using

IFAC or INTOSAI standards,

audit reports shall express an opinion whether the financial account is correct and

gives a true and fair view of the core activities of the organization,

the auditor shall submit a management letter, which shall communicate any

deficiencies and weaknesses in the organizational structure and the status of the

organization’s internal control system, and

the organization should formally reply on the conducted audit with a management

response.

To document the audit processes, the CSO needs a separate audit policy on external audit.

Such policy should include:

rules for the frequency and scope of the external audit,

Terms of Reference for the auditors

how the auditor is to be procured,

who within the organization is responsible for responding to the Auditors’ findings

and recommendations,

rules establishing that the General Assembly should review the financial audit and

management letter, and

systems and procedures of internal audit including reporting lines and responsibilities.

Internal Audit

Many Ukrainian CSOs have an audit committee established in their charter (a requirement

under the former NGO law). The audit committee should report to the General Assembly.

The Chartered Institute of Internal Auditors (www.iia.org.uk) provides the following

overview of the different roles and objectives of an external and internal audit:

External audit Internal audit

Objectives

Add credibility and reliability

to financial reports from the

organization to its

stakeholders by giving

opinion on the report

Evaluate and improve the effectiveness of

governance, risk management and control

processes. This provides members of the

boards and senior management with

assurance that helps them fulfil their duties

to the organization and its stakeholders.

Coverage Financial reports, financial

reporting risks.

All categories of risk, their management,

including reporting on them.

Responsibility

for improvement

None, however there is a duty

to report problems.

Improvement is fundamental to the

purpose of internal auditing. But it is done

by advising, coaching and facilitating in

order to not undermine the responsibility

of management.

Links and further readings

Sida: Audit Manual

http://www.sida.se/Publications/Import/pdf/sv/Audit-Manual_1006.pdf

Chartered Institute of Internal Auditors: What is internal audit? Information to help you

understand the role and value of internal audit:

http://www.iia.org.uk/media/91287/0731_what_is_internal_audit_dec_2012.pdf

Mango: Example of an Internal Audit Checklist for a small NGO:

http://www.mango.org.uk/Guide/InternalAuditChecklist

TTDI criteria

Criteria “Must” for

mini grant

“Must” for

organizational

grant

“Should” for

further

development

Financial audit n/a Has undergone a

financial audit

according to IFAC

standards

Has an audit policy

or established

routine for

conducting regular

organizational

audits according to

IFAC standard with

a defined ToRs for

the auditor

12. Accounting

Accounting systems

While the organizational assessment should not review the complete accounting records, it

should assess the accounting system. CSOs in Ukraine are likely to use one of the following

accounting methods:

- Manual accounting (on paper): this is foremost likely to be found in very small and

informal CSOs.

- Accounting in Excel: some CSOs do the accounting in own-constructed Excel sheets.

While this at least provides an electronic accounting, it has several flaws including:

o A high risk of human errors when entering numbers

o A possibility to erase, change or add numbers without any traces in the book-

keeping

- Accounting software: the preferred and recommended way for accounting. In Ukraine,

the software “1C” is used by a majority of the CSOs. Newer versions of this software

offers possibilities to create financial reports automatically, and to conduct project

accounting (i.e. to be able to set up separate accounts for each project), while older

and simpler versions does not allow for this.

CSOs that do not have an accounting software that allows for project accounting often

combine the accounting software (for overall accounting) with Excel sheets to keep an

overview of each project account.

Accruals-based and cash-based accounting

Foremost for the analysis and assessment of the financial reports, it is important to understand

the two main approaches to accounting, accruals-based and cash-based, and what effects these

have on the financial reporting of the CSO.

Investopedia.com describes the difference between accruals-based and cash-based

accounting as follows: “The main difference between accrual and cash basis accounting is the

timing of when revenue and expenses are recognized….The cash method accounts for

revenue only when the money is received and for expenses only when the money is paid out.

On the other hand, the accrual method accounts for revenue when it is earned and expenses

goods and services when they are incurred. The revenue is recorded even if cash has not been

received or if expenses have been incurred but no cash has been paid.”

Example from Investopedia.com: Let's say you own a business that sells machinery. If you

sell USD 5,000 worth of machinery, under the cash method, that amount is not recorded in the

books until the customer hands you the money or you receive the check. Under the accrual

method, the USD 5000 is recorded as revenue immediately when the sale is made, even if you

receive the money a few days or weeks later. The same thing occurs for expenses. If you get

an electric bill for USD1700, under the cash method, the amount is not added to the books

until you actually pay the bill. However, under the accrual method, the USD 1700 is recorded

as an expense the day you get the bill.

While the Law on Accounting in Ukraine establishes accrual-based accounting as the

principle, in practice most CSOs uses thet cash-based accounting method. In some ways it is

an easier approach to use, and it is in line with the requests for reports to tax authorities

(which are produced with cash-based data). However, it also creates a less transparent view

on the financial situation of the CSO.

Example: CSO X uses cash-based accounting. In November 2013, it pays the office rent for

the next three months; November 2013, December 2013 and January 2014. The total cost is

UAH 30,000. The accountant records the total amount as a cost in November 2013.

By the end of 2013, the accountant summarizes the costs of the year in the annual financial

report. Since the total paid rent amount has been recorded during the month of November

2013, she will include all the UAH 30,000 as a cost for the year of 2013. In reality though,

this amount also includes costs for 2014 (i.e. office rent for January 2014).

If CSO X instead would have used accruals-based accounting, the accountant would have

recorded UAH 10,000 as a pre-paid expense = not a cost during 2013. The rent for January

2014 would be recoded in January 2014 as would be correct.

Useful documentation to request from the CSO

Document Purpose

Accounting policy Review if the policy provides clear rules and

responsibility

Review if the policy provisions for the use

of an accounting software

Examples of payments conducted and

entries in the book-keeping

Spot-checks if the established system is

properly implemented

TTDI criteria

Criteria “Must” for

mini grant

“Must” for

organizational

grant

“Should” for

further

development

Accounting system The CSO has

a trained

accountant

that performs

accounting

according to

an established

system

The CSO uses an

accounting software

for recording

transactions

The CSO performs

accruals-based

accounting

13. Authorizations and payments

Authorization of an invoice means that the document is properly signed by the person with

the authority to decide on the payment. Thereby the authorization is proving that the payment

can be made. Conducting the payment means to send out the money from the account/pay out

the money in cash.

Example: The CSO receives an invoice from an event company after arranging a round table.

First, the responsible project manager signs the invoice as approval that the costs are eligible

and the event has taken place. Thereafter, the Executive Director signs as the person with

legal status to authorize payments. This is the authorization process.

The Accountant thereafter enters the payment in the internet bank client and approves the

transfer with his/her electronic signature. Thereafter the Executive Director approves the

payment with his/her electronic signature. At this stage, the money leaves the CSO account.

This is the payment process.

Why is this aspect so important for a CSO? When handling public funds (from donors,

member fees etc.), the CSO is de facto managing funds that have been granted to the CSO for

a specific purpose. While in a private business, the owner or the director could perform

payments on his/her own, a CSO handling funds from the public needs to have a higher level

of control and transparency in its processes.

As a general rule, the CSO should have a “four-eyes principle” in each step. This means that

no one should be able to authorize or pay an invoice/cost without involvement of a second

person. This is a crucial principle to establish good internal controls: it should be impossible

for one person to authorize and/or pay anything on behalf of the CSO without a second

signature.

Example: The Accountant at CSO X does not have her own electronic signature for the

internet bank client system, but borrows the flash drive from the Executive Director tolog in

and enter the payments.. Thereafter the payments are signed by the Executive Director and the

transfer is performed. CSO X thus lacks a “four-eyes principle” both in terms of payment.

The CSO should have an established system of second signatures to ensure that no one

authorizes or conducts payments on his/her own. For authorizations, an authorization list or a

similar type of document needs to be established that defines who signs what.

Signature rights needs to be clearly documented. The right of first signature should be

given to the Executive Director in the charter. If the Executive Director has delegated this

right to someone else in the organization, this needs to be documented in a Power of Attorney.

Example: At IRF, the first signature right is held by its Executive Director according to its

Charter Thereafter, the first signature right has been delegated to the Finance Director up to a

limited amount. This delegation is documented in a Power of Attorney signed by the

Executive Director. The first signature (from the Executive Director or the Finance Director)

should always be accompanied with second signatures in line with the IRF policies.

While it is not a requirement according to the Ukrainian law, it is advisable for internal

control and transparency to establish a system where the Board approves very large payments

jointly with the Executive Director.

Payments should only be made once the proper authorizations have been documented, and

should be done by two persons with separate internet bank signatures in the bank client

system. This to avoid that one person has the possibility to clean the bank accounts of the

organization.

Cash payments generally means higher risks than bank transfers and should therefore be

minimized. Using cash opens up for possibilities of fraud and weakens the control, as cash

transfers are less traceable than bank transfers. If the CSO handles cash, it needs to have a set

of safe cash transfer procedures that at a minimum should include:

Established end-of-day cash limits

Proper documentation and book-keeping of cash transfers

Regular internal controls for the cash box

Example of a CSO without cash handling: CSO X does not handle cash. Salaries, invoices and

business travel expenses are all paid through bank transfer. The CSO also performs many

round table events in various regions in Ukraine. To avoid handling large amounts of cash and

have high costs for administration, they use regional event organizers that invoice the costs

directly to the head office in Kiev.

The processes of authorization and payment needs to be documented in a policy, either a

separate policy or as part of for example a financial manual.

Specific regulations also need to exist for business travel: if there are no joint rules on choice

of travel, per diems levels etc., the system does not protect from potential misuse. No manager

or employee should have the authority to authorize his/her own travel expense report.

Useful documentation to request from the CSO

Document Purpose

Documentation on authorization rights and

processes

Review that the authorization process is

documented and in line with good practice

Documentation on the payment process,

including rules for business travel

Review that the payment process is

documented and in line with good practice

Examples of conducted bank and cash

transfers

Cross-checks of how well the system is

implemented

TTDI criteria

Criteria “Must” for mini

grant

“Must” for

organizational

grant

“Should” for

further

development

High level of internal

control for

authorizations and

payments

The CSO has an

established system

to perform

authorizations and

payments/transfers

of funds

The CSO has an

authorization

system and a

system for

payments that

ensures at least two

signatures.

All signature rights

are properly

documented.

The CSO has a

business travel

policy

14. Procurement

Procurement is the purchase of goods and services. Conducting a proper procurement before a

purchase provides the organization with two important aspects;

- It allows the organization to properly analyze the market and get the best product for

the best price, and

- It establishes a fair and open competition that minimizes exposure to fraud.

The lack of a proper procurement process opens up for misuse of funds by over-paying for the

required service/goods (purposely or non-purposely). Internal controls are weak if one person

can decide on purchases for the organization.

Without a procurement policy, there are no formal restrictions to prevent a person with

signature rights to purchase anything at any cost. Therefore, the CSO needs rules around the

purchase process. A good procurement policy should at least include:

- The establishment of procurement thresholds: depending on the size of the purchase,

the organization can create different levels of procurements. While smaller purchases

can be done with no procurement, larger purchases needs an open tender with a joint

decision by several persons.

- The establishment of a step-by-step procurement process: the policy should give a

clear overview of how the procurement should be implemented under each threshold

level

- The establishment of a tender committee: For larger procurement, a tender committee

should jointly analyze the incoming bids and take a decision on reward. The tender

committee can include both finance and operations management representatives, but

could also with preference select new representatives for each procurement. There

should be a developed template for conducting the evaluation and document the

decision.

- The definition of rules for exemption from the policy: the policy should define under

which special circumstances the organization can make an exemption from the

procurement policy.

Many Ukrainian CSOs does not have a procurement policy. Instead, they use the different

procurement rules or policies of each donor financing its projects. However, for core support,

the CSO needs to have its own organizational procedures, including a procurement policy.

For the TTDI, the Sida’s procurement rules need to be implemented with the partner CSOs.

The rules can be found as annex to this guideline and incorporates the main aspects mentioned

above.

Useful documentation to request from the CSO

Document Purpose

Procurement Policy To review the system, its appropriateness,

its alignment with Sida’s procurement rules,

and its implementation

Documentation from conducted

procurement processes

To confirm that the procurement procedures

are followed in a random selection of

procurement processes

Links and further readings:

Report Annex 1: Procurement by Non-Governmental Organisations in the context of

Sida-financed projects/programmes, version of 2013

TTDI criteria

Criteria “Must” for mini

grant

“Must” for

organizational

grant

“Should” for

further

development

Procurement policy n/a Has a written

procurement policy

in line with Sida’s

requirements

Has implemented

the procurement

policy

15. Anti-Corruption

No organization is immune to corruptive behavior and fraud. Organizations using public

funds should have an additional focus on ensuring that there are protective measures taken to

protect the CSO from fraud and misuse of funds.

“There are generally three requirements for fraud to occur - motivation, opportunity and

personal characteristics. Motivation is usually situational pressures in the form of a need for

money, personal satisfaction, or to alleviate a fear of failure. Opportunity is access to a

situation where fraud can be perpetrated, such as weaknesses in internal controls, necessities

of an operating environment, management styles and corporate culture. Personal

characteristics include a willingness to commit fraud. Personal integrity and moral standards

need to be “flexible” enough to justify the fraud, perhaps out of a need to feed their children

or pay for a family illness. It is difficult to have an effect on an individual’s motivation for

fraud. Personal characteristics can sometimes be changed through training and awareness

programs. Opportunity is the easiest and most effective requirement to address to reduce the

probability of fraud. By developing effective systems of internal control, you can remove

opportunities to commit fraud.”2

By establishing effective and efficient operations, a reliable financial system, and be in

compliance with the law, a CSO can ensure a good internal control structure to prevent fraud

or misuse of funds. However, the CSO also needs to be prepared on how to deal with reports

on fraud if these would occur, and provide a context where its stakeholders would feel

2 University of California: “Understanding Internal Controls”, p. 3

comfortable to be whistle blowers. This is typically done through the establishment of an anti-

corruption policy that defines what the organization considers as corruption and establishes

how the organization should deal with incoming reports on possible misconduct.

For TTDI, Sida has a set of requirements that are to be followed by all organizations receiving

Sida funds:

The organization should have a documented and implemented anti-corruption policy

The anti-corruption policy should establish a possibility to report suspicions on

corruption anonymously

The anti-corruption policy should ensure protection of the whistle blower

The anti-corruption policy should establish clear steps of investigation

Sida’s position vis-à-vis corruption and financial mismanagement

NEVER ACCEPT!

ALWAYS ACT!

ALWAYS INFORM!

Sida’s view is that corruption is a serious hindrance to development. Corruption:

– undermines the rule of law

– demoralises political systems and democracy

– distorts competition in the market system

– results in the inefficient allocation of scarce resources

– affects the poor disproportionately

– undermines respect for human rights

– contributes to environmental degradation

– affects the will to invest

– destroys predictability and hope for the future

Useful documentation to request from the CSO

Document Purpose

Anti-Corruption Policy Review if the policy fulfills the Sida’s

requirements

Review if the policy is well implemented

and known in the organization

Code of Ethics Review if the policy is well implemented

and known in the organization

Conflict of Interest Policy for the

Supervisory Board

Review if the policy is well implemented

and known in the organization

Links and further readings:

University of California: Understanding Internal Controls

http://www-bfs.ucsd.edu/blink/ocbfs/acc/UnderstandIC.pdf

Sida: Sida’s Anti-corruption Regulation

http://www.sida.se/Publications/Import/pdf/sv/Sidas-Anticorruption-Regulation.pdf

Chr. Michelsen Institute, U4 Brief 2013:10: Donor anti-corruption strategies: Learning from

implementation

http://issuu.com/cmi-norway/docs/131219125823-

d5dae6e243ef40a88f1742f349ca7c05/6?e=1246952/6173581

Transparency International: International Principles for Whistleblower Legislation

http://issuu.com/transparencyinternational/docs/2013_whistleblowerprinciples_en

TTDI criteria

Criteria “Must” for

mini grant

“Must” for

organizational grant

“Should” for

further

development

Anti-corruption policy n/a The TT has an anti-

corruption policy that:

a) Gives

possibilities to

report

anonymously

b) Provides

protection for the

whistle blower

c) Gives clear

instructions on

how the

investigation

should be

performed and

by whom

The TT’s staff

members and

consultants knows

how to report a

potential

misconduct.

Annex 1

Procurement by Non-Governmental Organisations in the context of

Sida-financed projects/programmes, version of 2013

1. General principles

If the implementation of a Project/programme requires procurement by the Cooperation

Partner, the contract must be awarded to the tenderer with the most economically

advantageous tender (i.e. the tender offering the best price-quality ratio), or, in case of supply

contracts not involving after-sales service, the sole award criterion should be the price.

Contracts must be awarded in accordance with transparency and fair competition avoiding

any conflicts of interest. Contracts must not be split artificially to circumvent procurement

thresholds.

To this end, the Cooperation Partner must comply with the rules set out in sections 2 to 6

below, subject to section 7. These lay down the minimum procedures to be followed and it is

not precluded that other procedures offering more competition are utilised.

Sida will carry out ex post checks on the Cooperation Partner´s compliance with these rules.

Failure to comply with these rules would render the related expenditure ineligible for Sida

funding.

2. Eligibility for contracts

2.1.1. Nationality

Participation in tender procedures administered by the Cooperation Partner is open on equal

terms to all natural and legal persons.

2.2 Grounds for exclusion from participation in procurement

Candidates or tenderers will be excluded from taking part in a procurement procedure if:

(1) they are bankrupt or being wound up, are having their affairs administered by the

courts, have entered into an arrangement with creditors, have suspended business

activities, are the subject of proceedings concerning those matters, or are in any

analogous situation arising from a similar procedure provided for in national

legislation or regulations;

(2) they have been convicted of an offence concerning their professional conduct by a

judgment which has the force of res judicata;

(3) they have been guilty of grave professional misconduct proven by any means which

the Cooperation Partner can justify;

(4) they have not fulfilled obligations relating to the payment of social security

contributions or the payment of taxes in accordance with the legal provisions of the

country in which they are established or with those of the country of the Cooperation

Partner or those of the country where the contract is to be performed;

(5) they or persons having powers of representation, decision making control over them

have been the subject of a judgment which has the force of res judicata for fraud,

corruption, involvement in a criminal organisation, money laundering or any other

illegal activity detrimental to Sidas/Swedens financial interests;

Candidates or tenderers must certify that they are not in one of the situations listed above.

Points (1) to (4) do not apply to the purchase of supplies on particularly advantageous terms

from either a supplier which is definitely winding up its business activities, or the receivers or

liquidators of a bankruptcy, through an arrangement with creditors, or through a similar

procedure under national law.

2.3 Exclusion from award of contracts

Contracts may not be awarded to candidates or tenderers which, during the procurement

procedure:

(a) are subject to a conflict of interests;

(b) are guilty of misrepresentation in supplying the information required by the Cooperation

Partner as a condition of participation in the contract procedure or fail to supply this

information.

3. Common procurement rules

The tender documents must be drafted according to best international practice.

Sida will not publish notices and tender documents issued by the Cooperation Partner.

The time-limits for tenders must be long enough to give interested parties a reasonable and

appropriate period to prepare and submit their tenders.

An evaluation committee must be set up to evaluate tenders on the basis of the exclusion,

selection and award criteria published by the Cooperation Partner in advance in the tender

documents. This committee must have an odd number of members, at least three, with all the

technical and administrative capacities necessary to give an informed opinion on the tenders.

4. Specific rules for service contracts

4.1. Contracts from € 300 000 and above

Service contracts from € 300 000 and above must be awarded by means of an international

restricted tender procedure following publication of a procurement notice.

The procurement notice is to be published in all appropriate media, in particular on the

Cooperation Partner´s web site, in the international press and the national press of the country

in which the Project/Programme is being carried out, or in other specialist periodicals. It must

state the number of candidates which will be invited to submit tenders within a range of four

to eight candidates, and must be sufficient to ensure genuine competition.

All would-be service providers fulfilling the conditions referred to in section 2 may take part

but only candidates satisfying the published selection criteria and invited in writing by the

Cooperation Partner may submit a tender.

4.2. Contracts of less than € 300 000 but more than € 60 000

Such contracts must be awarded by means of a competitive negotiated procedure without

publication, in which the Cooperation Partner consults at least three service providers of its

choice and negotiates the terms of the contract with one or more of them.

4.3 Contracts of € 60 000 or less

For services of a value of € 60 000 or less, the procedures established by the Cooperation

Partner may be used, while respecting the rules and principles laid down in articles 1, 2 and 3

of this annex.

5. Specific rules for supply contracts (goods)

5.1. Contracts from € 300 000 and above

Supply contracts (goods) worth € 300 000 and above must be awarded by means of an

international open tender procedure following publication of a procurement notice.

The procurement notice is to be published in all appropriate media, in particular on the

Cooperation Partner´s web site, in the international press and the national press of the country

in which the Project/Programme is being carried out, or in other specialist periodicals.

Any would-be supplier which fulfils the conditions referred to in section 2 may submit a

tender.

5.2. Contracts between € 100 000 and less than € 300 000

Such contracts are awarded by means of an open tender procedure published locally: the

procurement notice is published in all appropriate media but only in the country in which the

Project/Programme is being carried out.

A local open tender procedure must provide other eligible suppliers with the same

opportunities as local firms.

5.3. Contracts of less than € 100 000 but more than € 60 000

Such contracts must be awarded by means of a competitive negotiated procedure without

publication, in which the Cooperation Partner consults at least three suppliers of its choice and

negotiates the terms of the contract with one or more of them.

5.4. Contracts of € 60 000 or less

For supply contracts of € 60 000 or less, the procedures established by the Cooperation

Partner may be used, while respecting the rules and principles laid down in articles 1, 2 and 3

of this annex.

6. Use of negotiated procedure

The Cooperation Partner may decide to use a negotiated procedure on the basis of a single

tender in the following cases:

(a) for the purposes of humanitarian aid and civil protection operations or for crisis

management aid. Crisis situations may be invoked only when they have been formally

recognised by Sida. Sida will inform the Cooperation Partner if a crisis situation has been

declared and the period for which the declaration will be in force.

(b) in which the services are entrusted to public-sector bodies or to non-profit institutions or

associations and relate to activities of an institutional nature or designed to provide

assistance to peoples in the social field;

(c) in which contracts extend on-going activities:

(i) not included in the main service contract which have become necessary to perform

the contract for unforeseen circumstances, and provided that the additional services

cannot be technically and economically separated from the main contract without

serious inconvenience for the Cooperation Partner and the aggregate amount of

additional services does not exceed 50% of the value of the principal contract; or,

(ii) which consist in the repetition of similar services entrusted to the contractor

providing services under the main contract, provided that:

(a) a contract notice was published for the first service and the possibility of

using the negotiated procedure for new services for the Project/Programme

and the estimated cost were clearly indicated in the contract notice

published for the first service; and

(b) the extension of the contract for a value and duration not exceeding the

value and the duration of the main contract.

(d) for additional deliveries by the original supplier intended either as a partial replacement

of normal supplies or installations or as the extension of existing supplies or installations,

where a change of supplier would oblige the Cooperation Partner to acquire equipment

having different technical characteristics which would result in either incompatibility or

disproportionate technical difficulties in operation and maintenance;

(e) in which the tender procedure has been unsuccessful, that is where no qualitatively and/or

financially worthwhile tender has been received. In such cases, after cancelling the tender

procedure, the Cooperation Partner may negotiate with one or more tenderers of its

choice, from among those that took part in the tender procedure, provided that the initial

terms of the tender procedure are not substantially altered;

(f) where, for technical reasons, or for reasons connected with the protection of exclusive

rights, the contract can be awarded only to a particular service provider;

(g) where warranted by the nature or particular characteristics of the supplies, for example,

where performance of the contract is exclusively reserved for the holders of patents or

licences to use patents;

(h) for contracts declared to be secret, or for contracts whose performance must be

accompanied by special security measures or when the protection of the essential

interests of Sida/Sweden or the partner country so requires;

(i) for contracts in respect of supplies quoted and purchased on a commodity market;

(j) for contracts in respect of purchases on particularly advantageous terms, either from a

supplier which is definitively winding up its business activities, or from the receivers or

liquidators of a bankruptcy, an arrangement with creditors, or a similar procedure under

national law;

(k) where a new contract has to be concluded after early termination of an existing contract.

Such a decision has to be substantiated by reason of non-performance by the supplier or

by reasons for termination similar to grounds for exclusion as mentioned under section

2.2.

7. Special cases

Different rules than those specified in this annex may apply in the following cases, with the

exception of the principles described in section 1 which always apply.

7.1. Central Buying Offices

Where the Cooperation Partner uses a central buying office as service provider, it must be

selected in conformity with the procedures set out above for service contracts.

This central buying office applies the rules imposed on the Cooperation Partner.